I am ofter asked what is the best method to determine safety stock levels. It’s simple, there is no simple application rule as each SKU has a history. The answer I will usually provide is relative to where the product is sourced, how it is shipped, how much stock the business wants to keep on the shelf, what is the SKU movement history, is it impacted by seasonal trends, what is its value… and once I have that information, I can start. To apply a generic one rule applies approach will end up in a disaster.

Shorts are created due to insufficient stock in the pick face. This is due to the slot size not meeting the correct level of pick, replenishment rates not matching the pick rate requirements. Create a system report that looks at the next period pick and determine prior if the slot size is adequate. Adjust up or down as needed. It is also critical to understand your replenishment rate capabilities. A slot size would typically have 2-3 days pick available.

In larger DC’s, efficiencies in operations are compromised when reserves are above 75%. At this level, pallets are located further away from the pick face resulting in additional travel distance and processing time. If your DC is operating at a reserve capacity in the 90’s, the operations are heavily affected.